Egypt-Israel Gas Issue Becoming Explosive

CAIRO, May 8 2012 (IPS) - The two weeks since Egypt’s abrupt cancellation of a Mubarak-era gas-export deal with Israel have seen an exchange of indirect threats and warnings between the two countries, culminating in an apparent Israeli military build-up on the border of Egypt’s Sinai Peninsula.

The banners at this Cairo demonstration say: 'No to gas exports to the Zionist enemy'. Credit: Khaled Moussa al-Omrani/IPS.

“In recent days, Israel appears to have begun preparing for military deployments on its southern border,” Tarek Fahmi, head of the Israel desk at the Cairo-based National Centre for Middle East Studies, told IPS.

On Apr. 22, Egypt unilaterally cancelled a 2005 export agreement for the sale of natural gas to Israel, which for the past five years had ensured a steady supply of Egyptian gas from the northern Sinai Peninsula to Israel. Egyptian energy officials attributed the move to Israel’s failure to meet payment deadlines, stressing that the decision was “not politically motivated.”

Israel, which is said to depend on Egyptian gas for some 40 percent of its electricity needs, was quick to register its opposition.

Several Israeli officials warned of the move’s dire implications for the Camp David peace agreement, signed between Egypt and Israel in 1979. Israeli opposition leader Shaul Mofaz called on his country’s chief patron, the United States, to intervene on Israel’s behalf.

The Israeli Finance Ministry went so far as to describe the move as “a dangerous precedent that casts clouds over the peace agreements and the atmosphere of peace between Egypt and Israel.”

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While Israeli officials have vowed to take legal action to ensure the supply of Egyptian gas, local energy analysts say Egypt was well within its legal rights to opt out of the deal.

“The Israeli purchasers failed to pay their bills to the tune of some 100 million dollars,” Ibrahim Zahran, Egyptian petroleum expert, told IPS. “The contract clearly states that if either party fails to live up to its obligations, the other has the right to terminate the agreement.”

Egypt first began pumping natural gas to Israel in 2008, based on a deal hammered out three years earlier that allowed Egypt-Israel joint venture East Mediterranean Gas (EMG) to sell Egyptian natural gas to Israeli buyers, including the government-run Israel Electric Corporation.

Notably, the pipeline that carries the gas across the northern Sinai Peninsula to Israel has been subject to 14 attacks of varying severity – all by as-yet-unidentified culprits – since Egypt’s revolution early last year, often resulting in lengthy supply stoppages. As a result, electricity prices in Israel have reportedly increased by over 20 percent since the beginning of 2011.

Given the export deal’s broad unpopularity, the decision to scrap it was welcomed by Egyptian public figures and groups across the political spectrum.

Mahmoud Ghozlan, spokesman for Egypt’s Muslim Brotherhood (which now controls almost half of the seats in parliament), called the decision “excellent,” noting that Egypt “badly needs all of its natural gas to meet its own domestic consumption needs.” The liberal Egyptian Social Democratic Party described the move as “the inevitable fruit of Egypt’s January 25 Revolution.”

Frontrunners in Egypt’s first post-Mubarak presidential polls, slated for May 23/24, likewise hailed the decision. “The move should come as no surprise given the information about the corruption that surrounded the deal,” former Arab League chief and presidential hopeful Amr Moussa told IPS.

Indeed, Sameh Fahmi, Mubarak’s last petroleum minister, is currently on trial – along with six other former officials – on charges of squandering public funds related to the gas-export agreement. According to prosecutors, the deal has so far resulted in over 714 million dollars in losses to the public purse.

While the decision to terminate the agreement was officially attributed to “commercial reasons”, Egyptian analysts believe it was prompted by political and strategic considerations.

“The move transcends mere commercial factors,” said analyst Fahmi. “A decision of this magnitude couldn’t have been taken without the approval of Egypt’s ruling military council.

“The decision has certainly bolstered the popularity of both the military council (which has governed the country since Mubarak’s ouster) and the military-appointed government, both of which had come under increasingly strident popular criticism in recent months.”

Fahmi does not rule out the possibility of military escalations should relations deteriorate further.

Only days before the termination of the gas-export deal, Israeli Foreign Minister Avigdor Lieberman reportedly described Egypt as a “greater threat than Iran”, calling for the deployment of additional divisions to Israel’s southern border. “We have to be prepared for all possibilities,” Lieberman was quoted as saying in the Hebrew press.

And one day after the deal’s termination, Field Marshal Hussein Tantawi, head of Egypt’s ruling military council, warned that Egypt’s border was “perpetually in danger.” In a speech before troops from the Egyptian Second Army – who were conducting exercises in Sinai at the time – Tantawi promised to “break the legs of anyone who dared encroach on our borders.”

According to Fahmi, Tantawi’s statement “sent a message to Israel that Egypt is ready to defend its territory from any aggression.” It was not insignificant, Fahmi went on to point out, that Tantawi’s comments “came as the Egyptian Second Army was holding its first live-fire military drills in Sinai since the signing of the peace agreement.”

In a further apparent escalation last week, reports emerged that Israel planned to deploy at least 22 reserve battalions to its borders with Syria and Egypt due to “growing instability” and possible “security threats” emanating from both countries. Israel’s military has reportedly already approved official requests for the call-up of reserve forces.

“Recent developments point to an Israeli military build-up on the border with Sinai, carried out in order to deal with Egypt from a position of strength,” said Fahmi. “In the absence of a diplomatic resolution of the current crisis in relations, it would be a mistake to dismiss the potential for eventual military conflict.”